Deutsche Börse AG

Jan Strecker – Head, IR Gregor Pottmeyer – CFO Eric Müller – Group Treasurer and Managing Director, Group Strategy

Jillian Miller – BMO Capital Markets Bruce Hamilton – Morgan Stanley Arnaud Giblat – UBS Securities Tom Mills – Keefe, Bruyette & Woods Daniel Garrod – Barclays Capital Peter Lenardos – RBC Capital Markets Federico Salerno – MainFirst Bank Johannes Thormann – HSBC Dirk Becker – Kepler Cheuvreux Akhil Bhatia – Rosenblatt Securities

Welcome, ladies and gentlemen, and thank you for joining us today to go through Deutsche Börse’s third quarter 2013 results. With me are Gregor Pottmeyer, Chief Financial Officer of Deutsche Börse; and Eric Müller, Group Treasurer and Managing Director responsible for Group Strategy.

Gregor will take you through the presentation. After the presentation, we would be happy to take your questions.

The presentation materials for this call have been sent out via email earlier today and can also be downloaded from the Investor Relations section of our website. As usual, this conference call will be recorded and is available for replay.

Let me now hand over to you, Gregor.

Yes, thank you Jan, and welcome ladies and gentlemen. Let me start the call with a short overview.

Volumes in the third quarter were negatively affected by low equity market volatility and the continued low interest rate environment. As a result, net revenue amounted to EUR 458 million.

Despite the cyclical headwinds, we saw further growth in new products with dividend and volatility derivatives hitting record high and the OAT, BTB derivatives now accounting for some 5% of fixed income derivatives activity on Eurex. There was also further progress in implementation of our growth initiatives with the announcement that Singapore’s SGX and Dubai’s DGCX plan to join Clearstream’s global liquidity hub.

As announced on Monday, we have now the option to settle OFAC investigation into Clearstream. The original indicative penalty of OFAC in January 2013 amounted to approximately US$340 million and we can now settle it around EUR 83 million post-tax reflecting tax deductibility of a potential settlement.

On that basis, we have already provision for potential OFAC settlement in our third quarter results. In terms of the further process, we will now analyze the information we received from OFAC and then decide on whether to reach a settlement.

With the significant progress we made in the Peterson case and the now available option to settle with OFAC, legal risk for the Group has been reduced significantly. The efficiency measures are on track and adjusted operating costs in the first nine months were in line with our guidance for slightly higher costs due to strategic roadmap investments.

The third quarter was the first period that saw the full benefit of our debt refinancing at highly favorable rates which helped us to cut interest expenses significantly. In the first nine months 2013, net revenue amounted to around EUR 1.44 billion, a slight decline of 3% compared to the previous year.

This was mainly driven by the decline of volumes in equity index derivatives, as a result of lower equity market volatility. Net revenue in our Clearstream and Market Data + Services segment remained relatively stable, while net revenue in Xetra segment increased slightly.

The EUR 700 million adjusted operating costs we achieved a clean EBIT of EUR 746 million. Post-tax, the adjusted net income amounted to EUR 501 million, and earning per share to EUR 2.72.

Moving to Page 3 and the details of the third quarter. The equity index volumes as the year-over-year decline of the net interest income caused a small decline of net revenue to a level of EUR 458 million.

Due to the termination of the Scoach joint venture with Swiss Exchange SIX, we have fully consolidated our part of the business in this third quarter. Net revenue and costs have been assigned to the Xetra and Market Data + Services segment.

Scoach earnings are therefore no longer included in the result from equity investments. For Xetra, this means increase in net revenue from transaction fees amounting to roughly EUR 3 million and higher operating cost of some EUR 2 million each quarter.

For Market Data + Services, net revenue from the connectivity business increased slightly, while net revenue from the technology service previously provided to Scoach are not recorded as net revenue any more. As expected, the operating costs in the third quarter on an adjusted basis remained on the level of the previous two quarters, reflecting the higher investments in growth and infrastructure.

Operating costs include EUR 8 million exceptional items, mainly relating to the efficiency measures and around EUR 115 million relating to the potential OFAC settlement. Adjusted for those exceptional items, earnings per share in the third quarter amounted to EUR 0.83.

Now turning to Eurex on Page 4. Eurex traded contracts decreased 10% in the third quarter compared to the previous year, mainly due to the weakness in equity-based derivatives while interest rate derivatives slightly improved.

As a result, net revenue in the Eurex segment stood at EUR 169 million and adjusted EBIT amounted to EUR 80 million. Cash market volume in electronic trading which includes the main key profit [ph] market and the retail trading including the former Scoach business remained stable year-over-year.

Net revenue increased 16% to EUR 40 million, mainly as a result of the Scoach consolidation. And EBIT on an adjusted basis stood at EUR 18 million.

At Clearstream, assets under custody is increased 4% year-over-year to an average of EUR 11.6 trillion mainly as a result of higher index levels and market share gains. As announced in June 2013, UBS appointed Clearstream as its primary ICSD for the global securities business of its investment bank and wealth management services.

As the assets will be transferred to Clearstream until the end of the year, we expect assets under custody to continue developing positively. The reason why the custody net revenue have not increased in the third quarter, mainly related to the product mix and one-off effects.

Settlement activity rose 5% compared to the third quarter 2012, mainly driven by trading activity in the domestic market. Since the second quarter, the Settlement net revenue include an incremental fee we are temporarily collecting to cover some of the TARGET2-Securities infrastructure costs.

GSF volumes outstanding were up 2% year-over-year, while GSF net revenue increased by 9% to EUR 15 million. While the LTRO program by the ECB still prevents volumes to grow more significantly, the diversified product mix resulted in a better net revenue performance.

The cash balances at Clearstream continue to increase with an average of EUR 8.9 billion in the third quarter 2013. However, as a result of the low interest rate, net interest income decreased to EUR 8.1 million.

Compared to the second quarter 2013, the average cash balance decreased by 13% mainly due to cyclicality. In the fourth quarter, we observed higher balances so far.

Total net revenue in the Clearstream segment amounted to EUR 160 million and adjusted EBIT stood at EUR 79 million. Net revenue in our Market Data + Services segment decreased 2% year-over-year.

While we were able to achieve growth in the connectivity business, net revenue in the technology area declined. This is mainly a result of the Scoach business being fully consolidated in the third quarter.

In addition, net revenue with the operators of German regional exchanges declined as a result of lower margins and the decrease in trading volumes. Total net revenue in the Market Data + Services segment amounted to EUR 89 million and the adjusted EBIT stood at EUR 45 million.

Let me now turn to our strategic priorities, starting on Page 8. Our strategy is focused on entering the next evolutionary phase for market infrastructure provider.

We are uniquely positioned in our industry to become the preeminent global provider for integrated risk, collateral and liquidity management. We have the right products and services in place to achieve this goal.

A leading derivatives market, a global post-trade provider, a high quality data offering, state-of-the-art information technology and the track record for market leadership, innovation and entrepreneurial dedication. As outlined previously, we continue to position our business in light of changing customer demands and new regulatory requirements, with the two key initiatives being collateral management services and clearing of OTC derivatives.

Also part of our roadmap is the expansion of our technological leadership. By combining our market data and IT businesses, we have formed a new segment Market Data + Services at the beginning of the year.

In addition, the geographic expansion, particularly in the Asian markets is a priority. This year we made further progress with the cooperation between Eurex and TAIFEX as well as the agreement with Standard Chartered and SGX as further partners in the liquidity hub.

Some milestones of our growth strategy have already been achieved over the last month as you can see on Slide 10. And we are continuing to work hard on achieving further progress in all areas going into next year.

As part of our collateral management services for instance, we will connect the market of Australia, South Africa, Spain by year-end 2013 and have signed further agreements with Singapore’s SGX and Dubai’s DGCX. With the global liquidity hub, we are uniquely positioned to provide effective solutions for our customers and the new regulatory landscape.

In the new landscape, collateral will become as [indiscernible] and to show customers a way to mobilize collateral and use it in the most efficient way. Overall, we believe the opportunities of Deutsche Börse Group to grow over the next couple of years are very significant as shown on Slide 12.

This slide illustrates the three different categories in which we expect incremental net revenue. Clearly besides the opportunities, there are also some risks mainly from the different regulatory initiatives.

However, we firmly believe that the opportunity outweighs the risks. Again those risks then further cyclical opportunities.

Like for instance the recovery of index derivatives volumes which we have not factored into the number here. In Slide 13, we would like to highlight the further progress we made in some of our product initiatives.

The various new derivatives introduced at Eurex, the energy business at European Energy Exchange, the collateralized money market business, GC Pooling as well as the investment fund services at Clearstream are all products that have grown significantly in 2013. With the efficiency measures we announced early February, we will continue our effective cost management.

The measures we announced are on track to deliver the planned savings of EUR 70 million by 2016. As we will be able to save more non-personnel costs, the number of employees leaving the company through the Voluntary Leaver Program has been reduced to around 120 from 200.

Of the envisaged implementation cost of EUR 78 million have already been booked in the first nine month of 2013. In the third quarter, the benefit of the refinancing of our long-term debt completed in the second quarter, have reached now to full effect.

As a result, interest expenses relating to the bonds have approximately halved to around EUR 11 million in the third quarter. Due to our scalable and strongly cash flow generated business model, we are able to deliver attractive distributions to our shareholders.

Based on our capital management principles, we will discuss the dividend proposal for 2013 in the Board of Deutsche Börse over the next month and are planning to communicate the dividend proposal with the release of the preliminary results for 2013 in February next year. Besides the target payout range of 40% to 60% of the adjusted net income embedded in our capital management principles, we are aware how important dividend continuity is for our investors.

This concludes our prepared remarks. And we would now like to open up for Q&A.

Thanks. So I just wanted to get a little bit more detail on what you are thinking for your capital deployment in 2014.

I mean you guys are trending a little bit above your target leverage ratio of 1.5 times, and there is this potential settlement with OFAC that’s kind of hanging over. So, is it fair to say that we shouldn’t be expecting the buybacks or any kind of additional deployment on top of the regular dividend next year?

Jillian, thank you for the expected question. Now I said in my remarks with regard to the dividends that we now start the process, but we would really to see what other preliminary numbers in 2013.

We are currently in the process to prepare the budget for 2014. And you know our capital management policy with regard to 40% to 60% dividend payout ratio and in addition share buybacks if possible.

So you see our capital management policy commitment. We did some EUR 5 billion distribution since 2005.

So we take this topic really very serious. With regard to the potential imitating factor, so from rating agencies, interest cover ratios, so we are clearly above the 16 times so it’s 19.4.

With regard to the cross debt EBITDA number, we are now in the Q3 on a level of 1.6, so that’s likely above our targeted range of 1.5. And as a conclusion with regard to buybacks, because that was your concluding questions, so we will not do buybacks in 2013.

We will not do buybacks in first half year of 2014, as we do here our dividend payment. And then let’s see how the development is over the next seven, eight months, so that they can make a decision what happens in the second half of 2014.

Okay. Fair enough.

Thanks.

Hi, good afternoon guys. Just a quick one on costs.

Obviously, you’ve sort of reiterated that you’re on track on the cost savings and I think per year of sort of EUR 960 million cost guidance for this year, but as we pass to next year, how should we think about the build in this sort of cost synergies. Should that offset any investment, or like this year should we be thinking more that there might be, I don’t know sort of EUR 40-ish million of potential cost growth in the operating cost line as you look to further develop on some of those structured opportunities you’ve identified?

Yes, as you mentioned we established our EUR 70 million efficiency program that we want to fully achieve in 2016. With this we want to make sure that our BAU costs will not increase.

So you know we have some inflation in our salary costs and even in the non-personnel costs, so roughly that’s a 2% on our overall basis. So we are able to make sure that the BAU costs of the business, usually costs are flattish.

With regard to our strategic investments, as we have seen in 2013, we increased our efforts in growth opportunities and even in infrastructure. Currently, we are in the process to prepare our budget 2014.

Decision so far are not made with regard to this, but we are currently discussing an increase in the strategic initiatives.

Okay. So, would it fair to assume kind of similar sort of increase ‘13 on ‘12 on the base that where you are currently, I realize you haven’t finalized your budget discussions yet?

I think it’s really too earlier as we have to draw on the first or in general we want to increase our efforts in infrastructure. We see the window of opportunity is now even for some growth initiatives, but really it’s too early.

You will get some guidance even with our preliminary actual numbers in mid of February so that’s our assumption [ph].

Okay, thank you.

Good morning – good afternoon sorry. It’s Arnaud Giblat from UBS.

Just a quick question on interest rate swaps. There have been some press reports that you are preparing to launch exchange-traded futures on interest rate swap, do you expect these to draw the same in margining advantages, as we see in the U.S.

versus traditional Vanilla OTC swaps. In the U.S., there is a 50% margining advantage of trading on exchange rather than for a traditional swap?

Second, what level of velocity and acceptance or standardization should you – or do you expect to see from your clients? I’m just trying to get an idea of what kind of adoption we could get on these products?

Thank you.

Yes. Thank you for the question, Arnaud.

For us, it’s early days. We are consulting with our customers.

We’ve pointed out on past calls, that in Europe – the difference between the U.S. and Europe is that in the U.S.

you have a mandate to trade and clear these type of derivatives. In Europe, under the EMEA rules, there has only been obligation to clear.

And unlike the U.S. that’s not yet enacted because of the missing ESMA rules.

So the roadmap here if you will is that, sometime in the course of 2014 probably towards rather the end of 2014 with the latest ESMA guidance, we expect that the clearing obligation will be there, and in parallel, we’ll make sure we are ready that if there is a need in the market for an alternatives is what’s future that we can do that and that we are ready to launch such a product, but again our first priority is really getting our market ready for the clearing mandate that we expect to be effective some time during 2014.

And just to follow-up maybe, it seems as though Europe is going down the same route giving a lower margin requirement to margin trades that are traded on a future on exchange rate product versus an OTC. That is not a 100% clear yet obviously because the standards are not out but it seems that…

Yes.

That’s the way Europe is heading. Would you agree with that?

Yes, I mean it looks like we are heading in the same direction here, but again do not underestimate there is a difference in that they won’t be trading obligation for OTC derivatives. So we’ll have to see what the appetite is for an alternative venue here in Europe of an alternative to the OTC cleared products, but we will certainly make sure we are ready and we’ll certainly make sure that we pass on the benefits to the clients.

Great. Thanks very much.

Good afternoon. Just one – I guess we thought the FTT issue was abating.

I guess it looks now a little bit more like with the grand coalition in Germany this might be a potential issue again, could you say a little bit about your thoughts or what you might be heading on that, is it – and maybe the scope of it, if you have any sort of idea on that, please? Thank you.

Yes. Thank you, Tom, for the question.

So far from our perspective, there is basically no change. So even the coalition do not plan to do to introduce an FTT in Germany on a stand-alone basis.

It’s just confirmation that they would try to do it on a European level, so on the EU11 to the enhanced cooperation process, so far nothing new from that side. You have seen some comments from Christian Noyer, Chief of the Banque de France, who really has expressed his concerns publicly you have seen as in the FTT.

Then you are aware of legal advisors of the EU Council. They have concerns to take straight outside the jurisdiction where they take place or to extraterritorial principle.

So our view and our reads did not change. We continue to believe that the most likely scenario is introduction of the U.K and French stamp duty type of taxation on equities.

And this would not hurt our business materially.

Okay. Thank you very much.

Yes. Good afternoon, Gregor.

I’ve got a question on the collateral management revenues. You obviously indicated in the period some success signing up on other couple of partners in that area.

Obviously, you’ve given some color around the expectations of generating a EUR 100 million worth of incremental revenues over five years from 2012 to 2017 from these kind of services, I wondered if you could provide any sort of update on that given we are sort of practically one year in to that forecast. Where you are relative to your expectations, have you signed up more partners than you were expecting?

What is the sort of current incremental contribution from those partners, on the collateral management side? Thank you.

Yes, thanks Daniel. We are right on track with our implementation plan of this liquidity hub I mentioned in Dubai and Singapore to partner up with our liquidity hub.

We are right on track. We will do the implementation in Spain and in South Africa.

Others, in our pipeline what we did not publish so far. So our view is that we are here right on track.

And still there is a great demand by the different areas. There is demand by other market infrastructure providers.

There is demand by other agency banks even there is some demand of the buy side. So far, it’s just on us to implement our internal implementation is also right on track.

With regard to the implementation level, you will see our top line impact and in 2014, so that the higher part of the EUR 100 million what we have shown in our Investor Day will be more in the years ‘15, ‘16, ‘17 but nevertheless in 2014 you will see from our perspective following our implementation plan, nice growth increase in this area.

Sorry, so just to clarify some impact in 2014 but it is sort of that benefit more back-loaded ‘15, ‘16, ‘17?

Yes, exactly.

Okay, thank you.

Hi, good afternoon. You indicated that you took EUR 78 million in exceptional costs in the first nine months for efficiency measures.

I was wondering if you could quantify the amount of savings with the EUR 78 million achieved in the first nine months of the year. Thanks.

Yes, the EUR 78 million one-time cost related to our personnel measures, so it’s – the basis of basically the 50 manager and the roughly 120 employees. So that is the reason for that.

With regard to the efficiency, we see in 2013, so we gave some guidance that is roughly 30% of the EUR 70 million, so it means EUR 20 million and we are slightly above this EUR 20 million for 2013.

Thank you very much.

Yes, hi everyone. Gregor, just on the implementation cost again.

Can you remind me how much this should be in the fourth quarter please?

So far we gave you some guidance that we are in the range of EUR 90 million to EUR 120 million and I said maybe it’s something in the middle out of this for the next three years. So it depends on the success of implementing different measures.

So in Q4, you will most probably see no additional provisions for the personnel costs as we did now in the first quarter. And what kind of provision we have to build with regard to re-implement some non-personnel costs, these are lower month’s maybe a single digit million euro number.

Okay. So all in all it’s going to be limited?

All in all, sorry?

It is going to be quite limited?

Yes.

In the fourth quarter.

Yes.

Thank you.

Good afternoon there everybody. Johannes Thormann, HSBC.

A question on your net income from banking. Could you elaborate a bit more on your investment policy in detail, if everything is overnight, how much is collateralized investments, and then probably also, has there been any one-off effects in the second quarter?

Because if you calculate the simplified margin as net income from banking-related to the average cash balance, well we saw an increase in the last quarter, and now we saw a drop to the level of the first quarter again, what is driving those businesses? And can you elaborate a bit more on it, please.

Yes, thank you Johannes for the question. It’s Eric.

If you look over the last four quarters, you will find that three out of those four quarters, we’ve done EUR 8 million. In Q2, as you pointed out this year, we did something like EUR 11 million, so indeed a pickup there.

That number wasn’t indeed related also to exceptional development if you think back on the way there was a squeeze on short-term financing in China and the rates were spiking, so we have roughly 30, 35 currencies in the treasury. And although, some of these currency might be small, a huge pickup in the rates – overnight rates that we have seen for example in the renminbi balances at the time cost over million in exceptional in the second quarter.

So there is some items that we attribute that to and the run rate looks more like EUR 8 million per quarter.

And sorry – and then most of it is still overnight or anything with a longer duration?

No, the vast majority of these balances are on the short end. So, smaller than three months.

We do invest also in certain instruments of highest quality that could be FRN [ph], so technically this floating rate note issues would run for several years, but they would be reflecting the short-term rates in Europe. The Euribor for example has a coupon adjustment every three month.

So we are really bound to the short end of the rate curve in terms of the modeling the NII going forward.

Okay, thank you.

Yes, good afternoon. I would have a question with regard to EurexOTC Clear.

You obviously launched the service one year ago in November 2012, and I was just interested in knowing what’s going on that? Are you seeing any traffic on that platform or are you having any revenues on this or do we have to wait until EMEA is actually affect at the end of 2014 in order to see revenues from there, and what does it mean – you launched it last year, so what’s going on there?

Yes, Dirk, thank you for the question. So launch means that we are ready, the system is ready.

It can be used as you pointed out, ESMA regulation is currently not binding in Europe that’s the key difference to the U.S. here as pointed out earlier.

And we hope that it is towards the end of 2014 that the ESMA rules will be binding and then OTC derivatives in Europe will also have to be cleared like in the U.S. but there is no certainty around that thing now.

We observe that the market is getting ready so we have by now signed on around 20 members to the service. You might have seen some of the press releases lately.

So all the majors swap dealers are effectively already connected to our system, plus we are now getting a lot of interest from the buy side who are getting ready for this new obligation to be in effect. But as you pointed out, there is a waiting period unfortunately in Europe.

That’s point one. Point two is, there will be incentives in place in terms of fee waivers.

So we don’t expect a revenue contribution out of this before the end of 2015.

And what is the operating cost that you currently have from – you have from operating it?

Well, the cost in terms of operating that is negligible. What’s causing some of the let’s say cost items here is certainly building the capabilities and that is covered by our investment planners one of the reasons where Gregor has said earlier we are discussing also in the budget 2014 how much we allocate to new products and asset classes like this.

Okay, thank you very much.

I think then with this, we would like to…

Hello, can you hear me?

Yes, Bhatia.

Sorry.

Please go ahead.

Just a question on the leverage ratio. If the volume environment doesn’t improve, how do you plan to get it back to the 1.5 target, and two, what are the consequences if you can’t get it back to 1.5 for the business?

Yes, thank you for the question. As you are aware that this 1.5 is the target from a rating perspective, and so far it has a nominator and denominator.

And from a debt level we think with the EUR 1.5 billion, that’s reasonable debt level from our perspective. Now the question is what is the EBITDA?

And therefore our base case is that we will see growth, that we will increase our revenues over the next quarter than especially from a mid-term perspective for the next three to four years, as you have seen in our presentation, but we want to achieve some of this potential to achieve some EUR 2.3 billion to EUR 2.7 billion. And when we are able to follow this track, then we are also able to manage this requirement from the rating agencies.

And is the rating agency allowing – will they allow the two or three years to achieve that level or would you need to do something sooner, because if volumes don’t improve, you have ability on the expense side to improve the EBITDA or no?

Again cost is very important item, therefore we did another efficiency program, but our base case is that we are able to grow and that we fulfill this criteria not just in three years, we will fulfill it earlier.

Okay, thank you so much.

Thank you very much everyone for your attention. With this, we would like to conclude today’s call.

Have a good afternoon.